Question

Which of the following statements is true?

1) To determine the book value of a long-term asset, the balance in the accumulated depreciation account must be subtracted from cost of the asset.
2) Accumulated depreciation is a contra asset account.
3) The amount of depreciation expense recognized each year is added to the beginning balance of accumulated depreciation account to determine the ending balance of the account.
4) All of the statements are true.

Answer 1

All the statements provided by the student regarding the book value of a long-term asset, accumulated depreciation being a contra asset account, and the calculation of the ending balance of the accumulated depreciation account are true.

Step-by-step explanation:

The student has posed a question regarding the determination of the book value of a long-term asset and the nature of accumulated depreciation in accounting. To answer the question, it's crucial to understand each statement:

• Book value of a long-term asset is found by subtracting the accumulated depreciation from the cost of the asset.
• Accumulated depreciation is indeed a contra asset account, which means it carries a credit balance and is used to reduce the value of an asset.
• The amount of depreciation expense recognized each year is indeed added to the beginning balance of the accumulated depreciation account to determine its ending balance.

All the given statements are true and accurately describe the treatment of long-term assets and depreciation in accounting.